Australia's free trade deal with US hangs in balance on drugs

The fate of a proposed free trade deal between Australia and the United States, signed in May 2004 and due to come into force in 2005, is hanging in the balance because of the impact it could have on Australia's drugs bill.

The deal brokered between the two countries would give Australia increased access to US markets for its exports, particularly agricultural products. But the fear has been that the deal could also force Australia to pay higher prices for drugs similar to those that the companies charge in the United States, thus jeopardising Australia's public healthcare system.

Under the “reference pricing” system that currently operates in Australia, drugs proposed for the pharmaceutical benefits scheme (the government subsidised medicines programme) are benchmarked against the cost of generic agents. As …